ASST CIT (LTU) 1, MUMBAI vs. SONATA INFORMATION TECHNOLOGY LTD, MUMBAI

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ITA 1360/MUM/2017Status: DisposedITAT Mumbai11 July 2018AY 2012-133 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal followed its previous orders for earlier assessment years where similar grounds of appeal by the Revenue were dismissed. The Tribunal found the facts for the current assessment year to be identical.

What were the facts?

The Revenue appealed against the CIT(A)'s decision to allow service charges, deputation charges, and reimbursement of expenses paid by the assessee to its holding company. The Assessing Officer had disallowed these amounts.

What were the issues?

Whether service charges, deputation charges, and reimbursement of expenses paid to a holding company are allowable business expenditures.

Which sections of the Income-tax Act were involved?

Section 37(1)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCH “J” MUMBAI

Before: SHRI JOGINDER SINGH & SHRI N.K. PRADHAN

For Appellant: Mr. Anuj Kisnadwala, AR
For Respondent: DR Assessee by : Mr. Anuj Kisnadwala, AR
Hearing: 04/07/2018Pronounced: 11/07/2018

ORDER PER N.K. PRADHAN, A.M. This is an appeal filed by the Revenue. The relevant assessment year is 2012-13. The appeal is directed against the order of the Commissioner of Income Tax (Appeals)-1 [in short ‘CIT(A)’], Mumbai and arises out of the assessment completed u/s 143(3) of the Income Tax Act 1961, (the ‘Act’).

M/s Sonata Information

2.

The grounds of appeal

read as under:

1. On the facts and in the circumstances of the case and in law, the Id. CIT(A) erred in allowing service charges of Rs.15,51,25,076/- incurred for the services rendered by its holding company Sonata software Ltd. (SSL).

2. On the facts and in the circumstances of the case and in law, the Id. CIT(A) erred in allowing deputation charges of Rs.17,74,60,170/- in respect of personnel deputed by its holding company SSL.

3. On the facts and in the circumstances of the case and in law, the Id. CIT(A) erred in allowing reimbursement of various expenses of Rs.1,11,64,605/- to SSL, its holding company which was disallowed u/s 37(1) of the IT. Act.

3. The assessee is engaged in the business of trading in software. In a nutshell, the facts of the case are that the Assessing Officer made an addition of (i) Rs.15,51,25,076/- being service charges incurred for the services rendered by its holding company SSL, (ii) Rs.17,74,60,170/- of deputation charges to SSL and (iii) Rs.1,11,64,605/- towards reimbursement of various expenses to SSL.

4. Aggrieved by the order of the AO, the assessee filed an appeal before the Ld. CIT(A). We find that the Ld. CIT(A) has followed the order of the Tribunal for the AY 2009-10 and allowed the appeal filed by the assessee.

5. Before us, the Ld. DR relied on the order of the AO. On the other hand, the Ld. counsel of the assessee supported the order passed by the Ld. CIT(A) and also relied on the order of the Tribunal in assessee’s own case for the AY 2009-10(ITA No. 1424/M/2013), AY 2010-11 (ITA No. 1305/Mum/2014) and AY 2011-12 (ITA No. 4334/Mum/2015).

M/s Sonata Information

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